In a number of cellular systems transient DNA hypomethylation in the absence of DNA replication has been observed in response to induction of cellular differentiation. In collaboration with Dr. A. Razin we demonstrated that one of the early events in differentiation of FEL cells is the replacement of cytidine (C) for 5'-methylcytidine (mC) in mCpG residues in DNA. We also found that 3-deazaadenosylhomocysteine inhibits both differentiation and DNA hypomethylation. Cycloheximide can inhibit differentiation without affecting the induction-dependent decrease in the extent of DNA methylation. We conclude from these interesting results that the effect of 3-deazaadenosylhomocysteine on DNA methylation and differentiation may be due to the inhibition of an AdoMet-dependent posttranslational modification of 5-mC replacase and we are in the process of attempting to verify this possibility experimentally. The mechanism whereby CpG methylation causes trascriptional repression is not understood. Two alternative models may be envisaged. Promoter methylation might hinder the binding of transcription factors to DNA, thereby inhibiting directly gene expression or it might act indirectly through a mediator capable of binding to methylated sites in the promoter and thereby preventing the interaction between promoter and transcription factors and formation of the transcription complex. Our results support the second alternative (Proceedings of the National Academy of Sciences, in press) and indicate that a search for protein capable of binding specifically to methylated DNA should be our next objective.